Our Topic Today: Out of Market Actions

Why Do Markets Exist?:

The point of markets was never to just have markets.
One shared view is:To provide the lowest cost of reliable electric service over the long term to consumers while transferring the investment risk away from consumers by providing the opportunity for cost recovery and profit to investors.

Principles that guided one states’ approach to markets

Market mechanisms are preferred over regulation to set price where viable markets exist.

Risks of business decisions should fall on investors rather than consumers.

Why Do Out-of-Market Activities Occur?

There are state policy objectives and requirements that are not and/or cannot be met through a resource neutral competitive market

Competitive solicitations to meet state RPS requirements

Reliability concerns as a result of market failures

Winter Reliability Programs

Some but not all other factors important to policymakers

Support emerging industries in region

Preserve economic competitiveness

Satisfy state emissions reductions requirements

When markets do not meet consumer objectives

Infrastructure needed to access resources that can satisfy state statutory requirements, provide locally secure power, such as community microgrids, etc.

New England Governors – April 2015

“New England continues to face significant consequences for the region’s consumers. . . . The economic, system reliability, and environmental consequences of inadequate energy infrastructure require action. Cost-effective investment in new natural gas infrastructure and the continued integration of clean energy resources are important to resolving these challenges. With these infrastructure investments, and continuing aggressive investment in other clean energy solutions such as energy efficiency and distributed generation, our region can reduce energy costs and thereby attract new businesses and jobs for our hard-working citizens.”

Balancing Act: Markets and State Policies

The Commission must balance two considerations. The first is its responsibility to promote economically efficient markets and efficient prices, and the second is its interest in accommodating the ability of states to pursue other legitimate state policy objectives.

Current Renewable Exemption

Narrowly tailored to balance state policies and competitive markets

Only applies to resources that receive an out-of-market revenue source supported by a state- or federal rate

Not an outright exemption to all resources of a certain class

If OOM contracts are not needed, then no exemption

Must qualify as a resource under any New England state’s mandated (either by statute or regulation) renewable or alternative energy portfolio standards as of 1/1/2014

Prevents expansion of standards to bring in other resources for exemption without discussion (e.g. large-scale hydro)

Has an annual rolling MW cap

Cap limits market distortion

Can be reviewed over time to understand impact (18 mws in FCA9)

Markets that do not accommodate state policies are not sustainable over the long-term.

Distributed Generation

ISO-NE developed, at states’ request, solar PV forecast based on state policies with funding sources

At nameplate capacity, forecast expects installed solar to increase from roughly 1,233 MW in 2013 to almost 2,500 MW by 2024.

Only selected BTM portions of the PV forecast were used to reduce the load forecast used in the determining the installed capacity requirement

FCA10 ICR load reduction was approximately 369mw, future years estimated at 16mw’s on average

If load forecast is not adjusted, market would be distorted by overbuilding of capacity need

In the end, consumers are on the hook. Mitigating consumer costs is essential.

Some Current Activities

State officials continue to discuss ways forward on regional solutions

MA DPU docket to consider electric company authority under current law to support incremental gas pipeline.

Separately, broad legislative proposals under discussion

VT in process of siting evaluation of TDI Clean Power Link

ME and RI have enabling laws

Maine PUC proceeding underway to evaluation gas pipeline

Multi-State RFP

Certain state agencies and utilities in CT, MA and RI developed, with NESCOE assistance, a draft joint RFP for clean energy projects based on each state’s current authority. www.CleanEnergyRFP.com

Objective: To explore whether a multi-state procurement might attract larger-sacle projects and transmission than single state procurements and achieve individual states’ clean energy goals more cost effectively than if each state proceeded on its own.

RFP Issuers will jointly and individually evaluate bids

Each state, EDC use own authority, criteria, judgment to determine whether a proposed project is cost-effective and beneficial for its consumers

Green Tracking

Verification of clean energy attributes for imported power is critical if Canadian resources with to be credited with helping states satisfy carbon reduction requirements or environmental objectives

Increased imports of Canadian power has the potential to help N.E. states achieve carbon reduction requirements or goals.

No uniform structure currently in place in Eastern Canada to measure, verify, and track emissions characteristics of imports into New England.

In 2013, N.E. Governors and Eastern Canadian Premiers adopted a resolution (Resolution 37-1) encouraging Canadian provinces to evaluate existing options and opportunities to adopt verification mechanisms of generation sources and environmental attributes that correspond with the existing New England Power Pool (NEPOOL) GIS verification system

Efforts underway in N.E. to facilitate tracking but some corresponding changes likely needed to other side of the New England’s borders.